Telecommunications Legislation Amendment (Fibre Deployment) Bill 2011

WARNING: This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

To amend the Telecommunications Act 1997 (the TA) in order to prohibit installation of fixed-line telecommunication infrastructure other than optical fibre lines or fibre-ready facilities (pits ,ducts and other facilities designed to carry fibre lines) in greenfield[1] developments, and to create a third party access regime for fibre-ready facilities installed in greenfield developments.

The Australian Government’s fibre deployment policy for greenfield developments forms part of its National Broadband Network (NBN) policy.

The key elements of NBN policy are:

connection of 90 per cent of all Australian homes, schools and workplaces with optical fibre delivering a broadband service speed of up to 100 megabits per second (Mbps), and

connection of all other premises in Australia with wireless and satellite technologies that will deliver broadband service speeds of up to 12 Mbps.

Over the period of the NBN rollout (planned to be completed by 2018), an estimated 1.9 million new premises will be built across Australia in greenfield developments.[2]

The present Bill is an altered version of the Telecommunications Legislation Amendment (Fibre Deployment) Bill 2010 (the 2010 Bill), introduced on 18 March 2010, and which lapsed upon prorogation of Parliament on 19 July 2010.[3] The key differences between the present Bill and the 2010 Bill are discussed later in this Digest.

The government has released two policy statements with regards to fibre in greenfields developments. On 20 June 2010 the government announced that the NBN Co would be the wholesale supplier of last resort for fibre connections in greenfield developments from 1 January 2011.[4] This announcement essentially means that the NBN Co will install fibre in all cases where a developer chooses not to install fibre during the construction of a development.

On 9 December 2010 the government released a statement containing further detail about the arrangements for fibre in new developments.[5] Key elements of the statement are:

from 1 January 2011, NBN Co will be responsible for installation of fibre at the development stage for all developments of more than 100 premises within the NBN Co’s fibre footprint

the new responsibilities apply to developments which have stage 5 approval[6] and for which 3 months notice has been given by the developer to NBN Co

NBN Co may use subcontractors or other arrangements to service new developments

NBN Co will establish a panel of fibre providers who can bid to install fibre on behalf of NBN Co

The Rudd Government announced its intentions to require fibre deployment in greenfields developments when announcing the NBN initiative on 7 April 2009.[7]

The government released a consultation paper on the 2010 Bill on 29 May 2009, receiving more than 80 submissions.[8] According to the Explanatory Memorandum to the 2010 Bill, submissions indicated “a general preference for Commonwealth legislation, reinforced by industry-developed guidelines or standards, over state, territory and local government approaches.”[9] A Fibre in New Developments Stakeholder Reference Group was established which “generally endorsed ... legislation to require installation of fibre-ready passive infrastructure.”[10]

The 2010 Bill was referred to the Senate Environment, Communications and the Arts Legislation Committee for inquiry and report by 12 May 2010. The committee received 15 submissions and held one public hearing, and reported its findings on 12 May 2010.[11] The committee made six recommendations, the final of which was that the 2010 Bill be passed. The remainder of the recommendations related to aspects of broader NBN policy. The committee made no specific recommendations suggesting changes to the 2010 Bill.

Non-government parties and independents have not expressed a position in relation to either the present Bill or the 2010 Bill.

The coalition has opposed the NBN policy from the outset.[12] The Greens have expressed qualified support for the NBN policy in general, although they have actively negotiated for changes to the NBN policy with regard to governance and privatisation.[13] Bob Katter, MP[14], Rob Oakeshott, MP[15] and Tony Windsor, MP[16] support the NBN policy. Following negotiation with the government on specific issues, Senator Nick Xenophon has supported the passage of key items of NBN legislation.[17]

The present Bill is substantially different from the 2010 Bill. The key differences are:

the 2010 Bill proposed several amendments to the code-making provisions of the TA to allow the ACMA to make codes dealing with design features and performance requirements for fibre lines and facilities (that is, technical standards). The approach of the present Bill is to include a single specific provision for the Minister to direct ACMA to make technical standards that deal broadly with ‘one or more specified matters’ (proposed section 376A)

the present Bill contains new provisions prohibiting the sale of building lots and building units, with the rules applying specifically to constitutional corporations (proposed sections 372G and 372H)

the 2010 Bill left details of a third party access regime to be provided by legislative instrument. The present Bill contains some detail of a third party access regime, but provides for the ACCC to make a Code setting out conditions (proposed Division 4 of Part 20A)

the present Bill effectively treats fibre-ready facilities as equivalent to sewerage, electricity and water infrastructure by applying the prohibition on installing fixed line facilities other than fibre-ready facilities to projects where these services have or will be installed (proposed paragraphs 372E(1)(c) and 372F(1)(c)).

These changes generally reflect the Government’s decision that the NBN Co be the fibre provider of last resort:

by providing for conditions and standards to be made regarding fibre-ready infrastructure,

by establishing a third party access regime which will allow NBN Co (and other fibre providers) access to passive infrastructure

The Government’s decision to make NBN Co the fibre provider of last resort quelled industry concerns that the 2010 Bill would result in purchasers of new homes shouldering the full cost of installing fibre infrastructure[18], but created some concern within the fibre deployment industry about the possibility of the NBN Co competing directly against fibre operators.[19] The 9 December 2010 announcement that the NBN Co would establish a panel of fibre providers resolved those concerns, although further controversy has since emerged about the NBN Co’s tender process for greenfields fibre installation.[20]

Several submissions to the consultation on the 2010 Bill expressed concern that the 2010 Bill did not contain a positive mandate to install fibre. The present Bill maintains the prohibition on installing fixed line other than fibre without a positive mandate to install fibre. Telstra states in its submission to the committee inquiry that:

Without a clear mandate to install fibre infrastructure, developers retain the option to proceed with developments without the installation of any infrastructure at all. To prevent this, the Commonwealth should utilise its full range of Constitutional powers. Telstra considers that the power over telecommunications is sufficiently broad to support a direct requirement on developers to install fibre or a requirement on State and Territory planning authorities to not approve developments unless they have fibre infrastructure.[21]

The Government’s 9 December 2010 announcement addresses this issue to some degree. Whilst the Bill does not contain a positive mandate to install optical fibre lines, it compels the installation of fibre-ready facilities. The announcement that the NBN Co will provide fibre in developments of more than 100 premises effectively confines this issue to developments of fewer than 100 premises.

Like the 2010 Bill, the present Bill relies heavily on subordinate legislation, drafts of which have not yet been provided by the government.[22] Matters which are left to subordinate legislation include:

the types of developments to which the proposed part 20A will apply (proposed paragraph 372(1)(b))

the making by the ACCC of a Code setting out the details of the third party access regime (proposed section 372NA)

the making by the ACMA of technical standards (proposed section 376A)

Master Builders Australia’s submission to the Senate inquiry into the 2010 Bill expressed concern about the amount of detail to be specified in legislative instruments:

Master Builders has serious concerns regarding this approach of this Bill at this time. The uncertainty of the detail as to the implementation of the Bill and the later “legislative instruments” is creating major concerns across the industry. Master Builders therefore finds it difficult to support the Bill until the details of implementation are finalised.[23]

Similar concerns were expressed by the Urban Development Institute of Australia.[24]

In its submission to the Senate inquiry into the 2010 Bill, Telstra noted the lack of detail with regard to the third party access regime which would allow carriers access to fibre-ready facilities owned by non-carriers.[25] Whilst the present Bill retains provision for the ACCC to make a code setting out conditions of access under the third party access regime, the operational provisions of the regime are included in the Bill (proposed Division 4).

In relation to ACMA’s role in making technical standards, the Managing Director of fibre provider Comverge, Mr Peter Saglietti, was quoted recently as saying that “it’s essential that existing greenfields operators should be governed by a standard that is not controlled by NBN Co. We need an independent standard ratified by the ACMA.”[26]

Telstra’s voiced similar concerns in its submission to the Senate committee inquiry into the 2010 Bill:

Direct fibre for businesses is already a highly competitive and dynamic market. There is no case for Government intervention to prescribe specifications in this market, and the prospect of Ministerial proclamation could discourage investment and innovation in this already competitive market.[27]

The Explanatory Memorandum addresses these concerns to some degree, stating that the Minister’s powers to specify conditions for installation of fibre-ready facilities under proposed paragraph 372E(4) are intended to be exercised only in the absence of codes and standards determined by industry:

It is envisaged, and considered preferable, for these matters to be addressed in industry codes and/or technical specifications determined by the industry. However, in the absence of codes or standards determined by an industry body, the Minister could use this power to specify relevant requirements, including potentially by reference to the specifications of a particular carrier (e.g. an NBN corporation).[28]

Part 1—General amendments

Items 1-8 insert terms used in the substantive part of the Bill, the proposed Part 20A, into the definitions section of the TA (section 7). These terms are building lot, building unit, fibre-ready facility, fixed-line facility, project area, real estate development project, selland subdivision. Each item in turn refers to definitions contained in proposed Division 6.

a prohibition on the installation, in new developments, of any line other than optical fibre line

the grant to the Minister of a power to specify, by legislative instrument, the developments or classes of developments which are subject to the prohibition on installation of any type of line other than a fibre line

a requirement that where fixed-line facilities are installed, they must be fibre-ready facilities

a prohibition on constitutional corporations selling or leasing land or buildings in new developments unless fibre-ready facilities have been installed

a third-party access regime allowing carriers access to fixed-line facilities owned by non-carriers, for the purpose of installing fibre

Proposed section 372B contains the rules about deployment of optical fibre lines[30] to building lots.[31] The proposed section would operate to ensure that where telecommunications lines are installed in a new development, fibre will be the technology deployed. Rather than creating a positive obligation to deploy fibre, the section prohibits installation of any type of line other than a fibre line. The Minister is granted a broad power to specify the developments to which the prohibition will apply.

Under proposed subsection 372B(1) the section applies to the installation of a line in a real estate development project[32] where:

the project involves the subdivision of land into building lots (proposed paragraph 372(1)(a))

the project is specified or ascertained in accordance with a legislative instrument made by the Minister (proposed paragraph 372(1)(b))[33]

the line is used to provide a carriage service to end-users for whom building units have been, are being or will be constructed on the building lots (proposed paragraphs 372(1)(c), (d) and (f))

the line is not on the customer side of the boundary of a telecommunications network (proposed paragraph 372B(1)(e)).[34]

Proposed subsection 372B(2) is the key provision of the section, containing a prohibition on the installation of any line other than an optical fibre line in a real estate development project which meets the conditions in proposed subsection 372B(1).

Proposed subsection 372B(4) allows the Minister to specify, via legislative instrument, conditions in relation to the installation of a line in a project area to which the section applies. The proposed subsection does not specify the matters which the legislative instrument may cover. The proposed subsection will allow the Minister to specify conditions in general as well as specifics such as data speeds, quality of service and reliability.[35]

Under the ancillary contravention provisions in proposed subsection 372B(6), a person must not aid, abet, counsel, procure, induce, be knowingly concerned with, be a party to or conspire with others to effect a contravention of proposed subsection 372B(2). Under proposed subsection 372B(7) a contravention of either proposed subsection 372B(2) or (6) attracts a civil penalty under Part 31 of the TA.[36]

Proposed section 372C contains an almost identical set of provisions applying to building units[37] where there is no subdivision of land.

Under proposed section 372D the Minister may, by legislative instrument, conditionally or unconditionally exempt conduct from the scope of proposed sections 372B and 372C. The instrument may also confer powers upon the ACMA.

Proposed division 3 concerns installation of infrastructure capable of carrying fibre lines (fibre-ready facilities[38]), as opposed to fibre lines. In cases where no fibre line is being installed, the division operates to ensure that appropriate infrastructure is included in a development to allow easy installation of fibre by the NBN Co at a later date.

Subdivision A

Proposed subdivision A contains rules about installing fibre-ready facilities in building lots and building units. Where one or more of water, electricity and sewerage infrastructure is installed, fibre-ready facilities must also be installed. Where none of these urban utilities are being installed there is no requirement to install fibre-ready facilities. The underlying assumption is that where no urban utilities are being installed, the development is likely to be outside the NBN Co’s fibre footprint and will be serviced by wireless or satellite services.[39]

Proposed section 372E applies to building lots. Under proposed subsection 372E(1) the section applies to installation of a fixed line facility to building lots where sewerage, electricity and water are supplied or are to be supplied to the building lots.

The key provision is proposed subsection 372E(2). The proposed subsection prohibits installation of a fixed-line facility[40] unless the facility is a fibre-ready facility.

Under proposed subsection 372E(3), if the NBN Co issues a statement that it will not be installing fibre to a project area, the prohibition above does not apply. This provision would be used where urban utilities are being installed in a development, but that development is nonetheless outside the NBN Co’s fibre footprint.[41]

Proposed subsection 372E(4) provides a very broad ministerial power to specify conditions for the purpose of the section. The provision is identical to proposed subsections 372B(4) and 372C(4).

Proposed section 372F contains identical provisions to proposed section 372E, but applying to building units rather than building lots.

Subdivision B

Proposed subdivision B contains rules prohibiting the sale, by constitutional corporations[42], of building lots and building units where fibre-ready infrastructure is not installed. The provisions in subdivision B can be considered the key provisions of the Bill, as they effectively require the installation of fibre-ready facilities by prohibiting sale or lease of lots which do not have these facilities installed.

Proposed section 372G applies where a project involves the subdivision of land into building lots, where building units have been or where it is reasonable to expect to be constructed, and where sewerage, electricity and water are or will be supplied to the lots (proposed subsection 327G(1)).

Proposed subsection 372G(2) prohibits the sale or lease by a constitutional corporation a building lot to which the section applies unless a fibre-ready facility is installed in proximity[43] to the lot.

Under proposed subsection 372G(3), if the NBN Co issues a statement that it will not be installing fibre to a project area, the prohibition above does not apply.

Proposed subsections 372G(6) and (7) contains ancillary contravention provisions and civil penalty provisions identical to those in proposed sections 372B and 372E (discussed above). A contravention of the section does not invalidate the transaction (proposed subsection 372G(8)).

Proposed section 372H contains largely identical provisions to those contained in proposed section 372G which apply to projects which involve the construction and sale or lease of building units but do not involve subdivision of land (for example, an apartment complex).

Subdivision C

Subdivision C contains proposed section 372J by which the NBN Co can issue a statement that neither it nor any other NBN corporation has installed, is installing or proposes to install optical fibre lines in a given project area. Such a statement would be issued where the NBN Co has determined that the area will be serviced by wireless or satellite. Where the NBN Co issues such a statement the prohibition provisions in each of proposed sections 372E, 372F, 372G and 327H do not apply. Under proposed section372JA the NBN Co must keep an online register of such statements.

Subdivision D

Proposed subsection 372K contains a broad exemption power allowing the Minister, by legislative instrument, to exempt a development project from the scope of proposed section 372E and 372F (installation of fibre-ready facilities) and proposed sections 372G and 372H (prohibition on sale or lease) . A legislative instrument made under the section may confer functions and powers on the ACMA (proposed subsection 372K(9)).

Proposed division 4 contains an access regime allowing third party access by carriers to fixed-line facilities owned by non-carriers for the purpose of installing fibre in those facilities. The regime mirrors an existing third-party access regime in Schedule 1 to the TA.[44]

Proposed subsection 372L(2) provides that the owner or operator of a fixed-line facility must, if requested , give a carrier access to that facility where access is sought for the sole purpose of providing facilities, carriage services or to allow a carrier to establish its own facilities. Under proposed subsections 372L(4) and (5) the ACCC may determine that access is not technically feasible and issue a certificate to that effect.

Under proposed section 372M if the parties fail to agree on terms and conditions of access and, failing arbitration, the ACCC is to be the arbitrator.

Proposed section 372N contains a broad exemption power allowing the minister to exempt, by legislative instrument, particular fixed-line facilities from the operation of proposed section 372L.

Under proposed section 372NA the ACCC may, by legislative instrument, make a code setting out conditions for access to facilities under the division. Non-compliance with the code attracts civil penalties, and the section contains identical ancillary contravention provisions as those in earlier parts of the Bill.

Item 11 amends existing section 376 to allow the ACMA to make technical standards about customer equipment and cabling to ensure interoperability with the NBN (or other superfast telecommunications network). Currently, the existing section 376 limits the capacity of the ACMA to make technical standards. Item 13 inserts proposed section 376A to allow the Minister to direct ACMA to make technical standards about specified matters.

Proposed section 372ZB provides for concurrent operation of State or Territory laws. An example of a complementary law offered by the Explanatory Memorandum is one which extends the operation of provisions of the Bill to entities other than constitutional corporations.[45]

Part 2 of the Bill would repeal proposed sections 372C and 372E the later of the enactment of Part 1 and the commencement of the Telecommunications Legislation Amendment (National Broadband Network Measures – Access Arrangements) Act 2011 (the Access Arrangements Act) occurs. The proposed sections insert into the TA definitions of optical fibre line and NBN corporation which are identical to those inserted by the Access Arrangements Act. As the Access Arrangements Act has in fact commenced, the unusual situation of a Bill repealing its own provisions arises.

The proposed legislation will result in fibre-ready infrastructure being installed in all new developments from 1 July 2011 and establish a regime for third party access to that infrastructure. These announcements partially legislate the announcements made on 9 December 2010. Much of the remaining detail of the Government’s policy with regard to fibre deployment in greenfields remains a matter of NBN Co practice. As per the Government’s 9 December 2010 announcement, the NBN Co will deploy the optical fibre lines in developments of more than 100 premises. The enactment of proposed section 382B will ensure that no copper is installed in any future development.

The Bill is notable for the degree of discretion conferred upon the Minister with regard to exempting prohibited conduct. The exemption powers are intended to be used to ensure that the provisions of the Bill are not applied to developments which are outside the NBN Co’s fibre footprint, where satellite and wireless technology will be deployed.

The NBN Co will work very closely with developers to ensure that the infrastructure installed is capable of carrying NBN Co fibre. In installing fibre-ready facilities, property developers are currently expected to register with NBN Co, install the infrastructure in accordance with NBN Co specifications, receive a certificate from NBN Co, arrange for a final inspection of the facilities by NBN Co, and exchange contracts with NBN Co for provision of fibre.[46] The Bill contains provision for these matters to be formally regulated by way of legislative instrument (proposed section 372E(4) and 372F(4)). The NBN Co has indicated that it will install fibre in accordance with ‘critical connection requirement dates’ provided by developers, with the result that purchasers of new homes will have access to high-speed internet services before much of the rest of the country.[47]

As the NBN Co provides wholesale services only, purchasers of new homes will need to arrange their internet services through a retail service provider.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2413.

[1]. Greenfield developments are developments where vacant land is subdivided and essential services infrastructure (water, sewerage, electricity) installed with a view to sale of subdivided lots or sale of houses and units built on subdivided lots.

[5]. Australian Government, Department of Broadband, Communications and the Digital Economy, Statement by the Minister of Broadband, Communications and the Digital Economy – fibre in new developments, op. cit.

[22]. Broad details of the proposed subordinate legislation were provided on 16 April 2010 the Department of Broadband Communications and the Digital Economy issued its Proposed Subordinate Legislation to give Effect to Fibre in New Developments Position Paper.[22] The paper summarised the intended scope of the subordinate legislation: to define ‘fibre-ready facilities’; to specify that all fixed-line facilities be fibre-ready facilities; establishing the criteria to determine which developments require fibre to be installed (in addition to fibre-ready facilities); to identify the circumstances where exemptions apply; to determine trigger events which constitute ‘planning approval’; and to set out conditions, including technical specifications, for optical fibre lines and fibre-ready facilities.

[30]. Proposed section 372ZC defines optical fibre line as a line that consists of, or encloses, optical fibre.

[31]. Proposed subsection 372Q(3) defines a building lot as a lot within a real estate development project.

[32]. Proposed section 372Q defines a real estate development project in such a way that it must involve the subdivision of land into lots. The project must involve either offering the lots for sale and/or the actual construction of building units on the lots which are then to be made available for sale or lease. Further applicable conditions may be specified in a legislative instrument.

[33]. Under proposed subsection 372B(5) such an instrument may also confer functions or powers upon the ACMA.

[34]. Item 9 amends section 22 of the TA to define the boundary of a telecommunications network with reference to rules contained in that section. Lines and facilities on the customer side of the boundary are the responsibility of service providers and their customers.

[36]. Under Part 31 of the TA the maximum penalty for each contravention is $250 000 for a company and $50 000 for an individual.

[37]. Proposed section 372S defines building unit as the whole of a building used for single occupation, parts of a building held under strata title, and parts of a building held under lease.

[38]. Proposed section 372W defines fibre-ready facility as an underground fixed-line facility used in connection with an optical fibre line. The Minister may specify, by legislative instrument, an underground fixed-line facility to be a fibre-ready facility.

[40]. Proposed section 372V defines a fixed-line facility as a facility (other than a line) used in connection with a line, which is not on the customer side of the telecommunications network and is used to supply a carriage service to the public.

[42]. The corporations power of the Australian Constitution (section 51(xx)) allows the Australian Government to make laws with respect to corporations. Entities other than constitutional corporations will not be bound by this section. The majority of the provisions of the Bill are made under the authority of the telecommunications power (section 51(v)). The making of laws regarding the sale or lease of property is beyond the telecommunications power, hence reliance on the corporations power in this instance.

[43]. Proposed section 372Y defines the term proximity in relation to fibre-ready facilities. A facility used in connection with a line is installed in proximity to a building lot if installed so as to enable the line to b readily connected to the building lot or building unit.

[44]. Part 5 of Schedule 1 to the TA provides for third party access to underground facilities. See discussion at Explanatory Memorandum, p. 34.

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